Spotlight on convenience and forecourt retailing in the Middle East
The latest edition of Shop Talk LIVE focused on the convenience and forecourt market in the Middle East. It was co-hosted by Insight Managing Director Dan Munford and Nikolay Vylegzhanin, Regional Director – Middle East, Shopworks.
The panel included Zacharie Ghoudane, Convenience Stores Manager, ENOC; Hussain Al Ishaqi, GM Retail, Oman Oil Marketing Company; Ramzi Al Majri, Head of Department: Convenience Retail, Food & Services, Oman Oil Marketing Company; and Craig Phillipson, MD, Shopworks.
The broadcast reflected on the NACS Convenience Leaders Exchange, which was recently held in the region. The inaugural event attracted more than 40 participants from the UAE, Saudi Arabia, Oman, Egypt, India and South Africa. Both ENOC and OOMCO joined the programme, which included site visits to ENOC, ADNOC and Emarat locations.
The LIVE shared Shopworks’ latest report on the Middle East and featured presentations from ENOC and OOMCO.
Craig Phillipson, MD, Shopworks, presented his company’s work in the region. The business has been active in the Middle East for 20 years, initially working for Axiom Telecom to help design new concept stores. The company’s design work progressed through into pharmacy with a chain called Planet Pharmacy before Shopworks landed its first petrol forecourt contract in the region, Emarat.
Phillipson and Vylegzhanin went on to present the highlights from Shopworks’ new report on Saudi Arabia, a market which is developing at pace. According to Phillipson, there is an opportunity for Shopworks to share the work it has done globally in the Saudi market and help to move the industry collectively forward.
In preparation, Shopworks has conducted a ‘deep dive’ into the market in Saudi Arabia to highlight the retailer opportunity.
Saudi Arabia opportunity
The Fuel & Convenience Retail in Saudi Arabia report shows Saudi Arabia is the biggest country in the region and has one of the fastest growing economies in the world. The country is going through massive transformational change, across all industries, fuel and convenience retail included.
There are 13,000 gas stations in Saudi Arabia and, unusually, 80% are independently owned. However, the market is undergoing rapid consolidation and bigger players are growing their networks.
These operators include local players like Sasco, Aldrees, Aramco and Petromin; regional players like ADNOC, ENOC and OOMCO; plus international brands including Shell and Total.
“It’s a go-to place in terms of the petrol forecourt so there’s a lot of opportunities in developing the fuel side of things,” said Vylegzhanin.
However, in order to differentiate and be successful and sustainable, players recognise they need to develop other areas of their businesses, such as foodservice and beverage.
F&B is booming in Saudi, Vylegzhanin said. Dunkin Donuts, for instance, has more than 600 locations and all major brands are present in the market and developing. The market is also dominated by the drive-thru model, accelerated by Covid but the trend has been there for a while, due to the hot climate. In coffee, for instance, there are more than 6,000 drive-thru barista coffee businesses in Riyadh alone.
It’s a challenging market too with a lot of competition from the traditional trade. As a result, network and format planning is really important to convenience store operators. Category management expertise is critical too since retailers must be very precise with their assortments and pricing because of the price sensitivity in the market.
While convenience stores on fuel forecourts tend to be premium, this positioning still needs to be fully developed in Saudi and for operators to clearly showcase why their offers can command a higher price tag, Vylegzhanin told the LIVE.
OOMCO differentiates in food and beverage
Hussain Al Ishaqi, GM Retail, Oman Oil Marketing Company and Ramzi Al Majri, Head of Department: Convenience Retail, Food & Services, Oman Oil Marketing Company provided an overview of the OOMCO business and its NFR (non fuel retail) development.
OOMCO operates 256 service stations across Oman (233), Kingdom of Saudi Arabia (12) and Tanzania (11) with more sites planned in all countries. The company provides a wide range of services. In addition to retailing fuel, it has an aviation fuels business; lubricants offer; non-fuel shop, food and services arm; a storage and distribution business; commercial fuels operation and marine fuels segment.
According to Al Ishaqi, the non-fuel shop, food and services arm has seen some of the greatest development and is a key area for differentiation. Innovations have been driven by changes in consumer behaviour. While historically service stations have been focused on the fuel purchase, more recently the younger generation (45% of Oman’s population is aged under 30), who are more mobile and active on social networks, are looking for new services.
OOMCO is meeting this new consumer demand with a range of offers beginning with the ahlain c-store brand. Today, there are more than 60 shops across the country, making it one of the largest chains in Oman.
OOMCO has also moved into the coffee market as the master franchisee for the Cafe Amazon premium coffee brand. In food, meanwhile, OOMCO is partnering with Steers on a burger restaurant concept and Debonairs Pizza for pizza.
“This is where we have really tried to leverage on the strength of the real estate that we have across the country and is where having our own franchise business is a key component in differentiating the business,” said Al Ishaqi.
At the same time, OOMCO has a number of strategic partnerships with other leading brands including Burger King, Subway, KFC and McDonald’s.
Outside of F&B, OOMCO is differentiating too. It has an established car care services business featuring its Optimo Plus Car Care Centres, which are located at many of its sites. OOMCO intends to continue to diversify with new services more forward, Al Ishaqi said.
Partnering with strong brands is key to successful differentiation, he added. The company also works closely with local brands in food, coffee and car care and emphasised the need to ensure teams are equipped with the right knowledge to operate all of these brands.
Al Majri provided more detail on OOMCO’s food and convenience store business on the LIVE. He also highlighted Oman’s young population and high level of urbanisation in the country, which means the retailer has to be more and more convenient for customers.
OOMCO has focused on building destinations both in the c-store and as a master franchisee, Al Majri said. Burger and pizza brands were selected due to the high growth in the Middle East for these meal options, which are commanding a 45% market share, up almost 8%; and forecast to grow further.
Coffee also appeals to young consumers who are looking for an experience, Al Majri added. However, tastes must be localised. Young people in Oman prefer Arabica medium roasted beans, for example.
“We try to adapt our offer to the local market. It’s important to have a localised offer as well as unique products,” Al Majri explained.
Drive-thru and delivery developments
Drive-thru and delivery have both been key developments at OOMCO. Drive-thru is massive in the region because of the weather but format planning is critical in establishing the right locations for drive-thru concepts and to meet the needs of different customer groups including students and women, said Al Majri.
Delivery has been another significant development with online delivery growing by 16% in Oman in the last year. OOMCO credits the gains to the attractiveness of digital ordering and its popularity among well connected young people, as well as the hot weather and consumer preference to stay at home and share pizzas etc.
OOMCO is working with Shopworks on delivery development, leveraging its real estate to select the most relevant stores and kitchens to prepare online orders.
Moving forward, OOMCO will be focused on reformatting and resizing convenience stores to including more food and beverage offers and new services in order to better meet customer needs.
OOMCO said it was optimistic about the future and was reporting good growth across the different businesses and the average throughput was increasing across its sites. The company is in a strong position due to the scale of its network and strong footfall. The growth of digitisation in Oman also provides an opportunity for the retailer to extend beyond the service station with online deliveries.
Zoom: the survival of the fittest
Zacharie Ghoudane, Convenience Stores Manager, ENOC, shared the latest developments at the Zoom convenience store chain, and the challenges facing the c-store.
“It’s not the best guys who are going to survive but those who adapt to the new customer requirements and new challenges,” said Ghoudane.
ENOC, originally EPCO, was formed as a joint venture with Caltex in 1988. The initial c-store format was branded Starmart. It became Aqua in 2000 following a redesign, while the Zoom brand was launched in 2009 as the retail arm of ENOC petrol station network.
Today, ENOC operates 180 service stations in the UAE. Zoom, which comprises 258 stores, is featured at 172 of those petrol stations with a further 50 at Metro stations plus 36 standalone outlets.
ENOC was invited to deploy its knowledge at the Metro in Dubai in 2009 and has exclusivity in the network. More recently Zoom has extended its retail expertise, delivering the standalone stores.
As a result, Zoom offers five retail formats. These include a compact station that ENOC is delivering for local communities and the eLink station, a truck store featuring a Zoom proposition. The Compact station features vending machines for fresh, snacks and coffee and is an unmanned solution, occupying 3-4sq m and featuring a small seating area. The eLink, meanwhile, is a business model that Zoom is creating in order to make deliveries to cars.
This flexibility means Zoom can trade from a vending machine business up to stores of 800sq m. “It’s not easy because we have a thousand different merchandising plans, a different customer portfolio and a different average basket,” said Ghoudane.
In addition, Zoom employs 2,000 retail staff comprising 64 different nationalities, which adds further challenges in terms of communication.
But Zoom is more than capable. Ghoudane reveals the company’s newsletter was published three times a week three years ago and each one was almost four pages in length. Now there’s one communication per week and no more than three messages. ‘“Believe me, three messages is the maximum the team on the field can absorb,” he said.
Digital innovation and wins
Ghoudane shared the current look and feel of Zoom stores, which are well received by customers. The environments are bright and welcoming and feature innovative digital pelmets. The digital signage extends outside too with digital screens on the four pillars of the forecourt and a 2m x 2m screen on the facade of the c-store. “These are not a ‘nice to have’ – we have done some studies and know a digital site is bringing three to four points more customers than a station without digital,” Ghoudane revealed.
Further, the penetration rate at a petrol station is 26% to 31% so, out of 100 customers refilling petrol, 26 to 32 are entering the c-store. Plus, in the 36 sites where Zoom has installed digital screens, the average penetration is three points higher than the sites without digital.
“So the digital is really an added value and the vendors they like it – especially the big guys like Coca-Cola and Pepsi and they like to put their content in that digital pelmet,” Ghoudane reported.
Ghoudane went on to share some of the business challenges, specific to the UAE. While top up business (used for mobiles and toll gates etc) accounted for 40% of turnover in 2016, by 2022 it had halved to 20%, equivalent to a loss of 2.5 million transactions. But the loss didn’t just impact top up sales, since customers who had been topping up their mobiles or toll gates were also buying a bottle of water etc.
To counteract the sales hit, Zoom launched a strategy to increase turnover from general merchandise. Ghoudane reports that the top up business loss has now been recouped and the retailer has replaced a “very poor turnover” with a “very rich turnover”, due to significantly better margins in food and general merchandise versus services.
In 2016 tobacco accounted for 27% of sales, while foodservice represented just 8% of sales and other merchandise a further 20%. In 2022, food services have grown to account for 15% of sales and other merchandise has increased to 41% of sales.
Further challenges included tackling the traditional tobacco decline, increasing food-to-go participation and improving the price perception of the petrol station.
The retailer has also needed to embrace new technology to increase convenience and reduce staff costs, added Ghoudane.
Zoom’s approach has been designed to ensure it’s understood by the whole team. “It’s complicated to do something easy but we tried to define who we are, what we want and how we want to run our business,” he said.
This spans community, increasing convenience, sustainability but all driven by strong collaboration. For example, Zoom joined Coca-Cola in an exclusive FIFA World Cup Qatar 2022 campaign, which gave customers a chance to win tickets to a World Cup match.
From a community perspective, Zoom is empowering women – today women make up a growing share of 48% of employees at Zoom and 27% of its 770 female employees are managers.
The company has also hosted an event exclusively for women, which was designed to recognise the strength of women in its community and help empower them more in future.
From a convenience angle, becoming a one-stop location is key at Zoom. This includes offering day-to-day services such as refuelling a car, paying for the Metro, transferring money with Western Union or becoming a PUDO location for Amazon. Zoom is also working with the Commercial Bank of Dubai to develop the ATM of the future.
On sustainability, Zoom is working with the WWF in terms of plastic reduction and has a strong program in the UAE. This included charging 25-fils for all single use plastic bags, selling reusable bags and raising the awareness about the impact of plastic bags on the environment.
The customer impact has been very positive and Zoom intends to stop plastic bag usage completely within the next year.
Zoom has also created its own private label in coffee to capitalise on its brand position and set a price point that sits between Starbucks and Nescafe.
Zoom is focused on increasing its participation in food-to-go too. Its own Pronto brand offers a ‘home made full food service offer’ and it has partnered with Starbucks on coffee within this retail proposition. The retailer has run a competition in conjunction with Starbucks enabling a customer to win a trip to Costa Rica.
Zoom is becoming a destination for hot dogs as well. The campaign was launched last year and gives consumers access to a hot dog with Pringles for €3.00.
In terms of value, Zoom is working to improve the price perception of its offer. This piece has included introducing two for one promotions on Coca-Cola, for example. This has fuelled a double digit increase in volume. Zoom has now extended this promotion to include a mix and match deal featuring beverages and snacks.
Zoom is also promoting its brand through its Yes Loyalty program. For Ghoudane, increasing penetration from the forecourt to the store is key and the Yes programme has been a crucial element in this process. Zoom is able to identify customers as they refuel and can trigger a non-fuel transaction message and the retailer reports it has seen ‘tremendous traffic’ due to that activity. Zoom is also incentivising customers through the loyalty programme, which drives penetration from the forecourt.
Zoom is working with aggregators as well and reports 15% of its turnover is generated through this channel. Online orders from e-commerce are prepared for collection at Zoom stores.
In addition, Zoom is fulfilling online orders to customers’ cars via a new app, Instazoom. Users enter their vehicle details and, while they are refuelling, they can place an order and will receive a delivery at their car. Zoom is incentivising customers with an introductory offer but the aim is to build penetration from the forecourt to the c-store.
ENOC and OOMCO are giving customers more and more reasons to visit their sites – not solely for fuel but for food and beverages and other added value services. These innovations look set to drive continued retail and foodservice penetration.
